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Friday, February 28, 2014

I've made an offer. What now?

OK, I've made an
offer - signed the Purchase Agreement and given my Realtor my earnest money check. What comes next?

This is part 5 of a 10 part series of FAQ questions and
answers about the real estate process from the buyers’ perspective.

Answer - Your Realtor will transmit your offer to the
listing agent for presentation to the seller. In some places your agent may
request the opportunity to actually present the offer to the seller; although
that doesn't happen much anymore here in Michigan. On most offers there will be a deadline for a
response; however, if you have made an offer on a foreclosed house or a short
sale, don’t worry too much about that deadline - the other side will answer
when they damned well feel like it. Get used to that in a distressed sale.

One of several possible things will happen after the listing
agent gets the offer.

Your offer may be accepted as it, in which case you can move on to
the next post in this series.

The seller may reject your offer, but make a counter offer.
In this case your agent will arrange to sit with you

again to go over the
counter-offer and give you his/her advice. The counter offer is most often made
by just scratching out words and/or numbers on your offer and the seller
writing in what is acceptable to him/her. This most often occurs when the
original offer was very close to what the seller will take, so he/she changes
the dollar amount on the Offer form, or to deal with a difference in a term or
condition, such as occupancy. It could also revolve around something that you
asked for that the seller is not willing to give, such as an appliance.

The seller may return a form called a Sellers’ Expression of
Intent. This is a form of rejection of your offer that keeps the process alive.
The sellers are basically saying “I do not accept your offer; however, if you
were to return with an offer that contains these changes (they will list their
requirements) I would favorably consider that offer.” Sellers sometimes use
this method because it does not tie their hands from looking at other offers
(after all they've expressly stated that they are not accepting your initial
offer). You agent will have to start over with a new Purchase Offer form, but
at least they have expressed interest in continuing to negotiate with you. Try
again with the changes that they have asked for (or at least all that you can
agree to do) in their reply.

The seller may just reject your offer with no counter-offer. The
seller is not really required to make any counter-offer. An outright rejection
often happens when the original offer was a "low-ball" offer or had
some conditions that the seller doesn't want to consider, such as a contingent
offer (an offer that is "contingent" upon the sale of the purchaser's
current home prior to the finalization and closing of the house being offered
upon). If the seller rejects the offer, without a counter-offer, then you would
need to start all over with another offer, if you still want the house. At that
point you would get your earnest money back, until such time that you make
another offer. If you plan on making another offer fairly quickly, just leave
your earnest money in escrow and apply it against the next offer.

If your offer elicits a counteroffer of any sort, you will likely
become involved in negotiations at this point, so here’s an interesting article
from Realtor Magazine on how
to negotiate without being a jerk.
I’ve certainly been involved in negotiations on both sides where one of
the parties was being a jerk about it and it’s not fun nor is it productive.
The other things that I've seen over time is that deals worth hundreds of
thousands of dollars can, and do, fall apart over issues or items that are
worth only a few hundred dollars. You must keep things in perspective during
this negotiating process.

Keep in mind during these negotiations that the seller has
effectively taken his property off the market while he/she dickers with you.
The seller is not going to want to keep the home off the market for long. That
works

for and against you – the seller will want to get to a decision quickly
(good for you), but he/she will also not want to screw around with someone who
doesn't seem serious enough to get to a conclusion quickly. The message here is
“don’t play games – you’ll lose.”

If the seller rejects your counter to their counter-offer,
be prepared to move on. They've had it with you for now and may not even
entertain future offers from you. You’ll have to start over with a new offer.
At that point it’s time to reassess whether you really want this house. If your
answer is “yes”, then it’s time to stop screwing around and make an acceptable
bid – you already know what the seller wants.

If you made a bid on a foreclosed house or a short sale, be
prepared for a counteroffer from the bank that is essentially a new offer from
them with their terms and conditions. You’ll need to go over that counter-offer
with your agent. You need to be careful to understand all of the terms and
conditions in the bank’s counter-offer, because some of them may have penalties if
you don’t meet their deadline for closing and there may be other terms and
conditions that are not advantageous to you. Many banks are now requiring the
buyer to pay some of the costs that the seller used to pay, like state taxes
and fees. Some are even refusing to pay back property taxes and requiring the
buyers to bring those taxes up to date.

Make sure that you understand any and all extra costs
involved with buying that foreclosed house, so that you can evaluate whether
the house is still a good deal. Also remember that the banks are not required
to supply any information about the condition of the house, such as Seller’s
Disclosures. They are still required to give you some form of Lead-based Paint
Disclosure.

If this is a short sale, you might as well settle in for the
long haul. Lenders are still taking 5-6 months to get through the short-sale
process and you may be required to update your loan application before this
thing even gets a decision. It is up to you to decide whether you want to spend
the money up front for a home inspection or wait until the bank approves the
short sale. Some banks may require that you do the home inspection and the
appraisal at the start of the process, which means that you could have around
$1,000 sunk into the house before you even find out if the bank will approved
the short sale.

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About Me

I'm a pre-Baby Boomer who just happens to be into technology and the Web. I created and maintain 6 Web sites - three for real estate (see above for links), one for the Milford Historical Society, one for teh Milford Car Show and one for my church. I've been a Realtor for a little over 10 years.
Prior to selling real estate, I had a 30 year career selling and marketing computers and related software and services for a variety of IT industry companies, many of them now long gone - Burroughs, Digital Equipment, Compaq, HP, EMC and SGI. I still keep up with what's happening in that space.
Now, I focus upon real estate, with a specialty in historic houses in and around the Milford, Michigan area. I'm also focusing more andmore on the needs of aging home buyers, since that is a category into which I fall myself.
I hope that you enjoy reading my blog as much as I enjoy creating it. Feel free to let me know your opinions or to add your comments to mine. I also have another blog - normsmilfordblog.com that is a bit more unpredictable in its content. Try it if you haven't already.I'm also on activeRain, Facebook, Linked In and Twitter.